It basically stops take a copy of your convosation but still does all the authentication etc Was an assumption see Google's answer :)
- What does it mean to go off the record?
We know that sometimes, we don't want
a particular chat, or chats with a
specific person, to be saved. Most
existing IM services give no
indication of whether the person
you're chatting with is saving your
conversation. But when chatting in
Google Talk or Gmail, you can go "off
the record," so that nothing typed
from that point forward gets
automatically saved in anyone's Gmail
account.
Going off the record applies to
individual people, and is persistent
across chats. That means once you go
off the record with a particular
person, you will always be off the
record with him or her, even if you
close the chat window, and the two of
you don't chat again until several
months later. You will not need to go
off the record each time you chat with
the same person, but you will need to
make this decision for each person you
chat with. We've designed this to be a
socially-negotiated setting because we
want to give users full disclosure and
control over whether the person
they're talking to can save their
chat.
To go off the record while chatting,
click the Options button and select
"Go off the record" from the dropdown
menu. Both people can go off the
record or stop chatting off the record
at any time, and we will always notify
both people of such a change.
REF Google Talk chat history
